Opinions expressed by Entrepreneur the contributors are theirs.
Like most entrepreneurs, you immerse yourself in your business – between hiring and managing employees, day-to-day tasks, and how to grow your business. Every penny goes to fuel the growth of your business. You can’t consider one more item on your to-do list, especially a business like buying real estate. I am writing this article to change your mind.
Currently, you have all your eggs in one basket with no big safety net. A slow month or quarterly projection that misses the mark can be extremely stressful. I think there is a way to ease some of the emotional roller coaster by owning assets that can work for you while you work on your business. After all, real estate investors make up 90% of millionaires. As a savvy entrepreneur, I doubt you want to pass up those chances.
Related: 8 Ways Real Estate Is Your Smartest Investment
Now that I’ve piqued your interest, I’m going to give you five reasons why you should invest in real estate and ways to take action today.
1. A property’s equity is available for a large cash injection through a refinance or HELOC
If you buy a property over time, its value will increase. The amount between your purchase price and the raise is all profit. You can refinance that money and owe no tax on it, or if it’s a primary residence, you can get a HELOC against the mortgage. I know a few business owners who needed a few hundred thousand dollars to grow their business and get the money fast because they owned real estate. I’m not advocating spending irresponsibly, but there are times when the influx of money is needed – and fast. It would be nice to have that safety net.
2. Take advantage of massive tax deductions by owning your building
If you run a business where you need retail, warehouse or office space, consider buying the building instead of renting it. I know it’s not always possible, but if you’re saving money and investing in the stock market or paying very high monthly rent, why not take those funds and use them as an asset? You will save money on rent. You can also have a building where you can have tenants covering your mortgage. You benefit from significant tax deductions and can even take advantage of solar credits. The benefits are endless. Buying a building may not be feasible if you are in the early stages of growing your business, but it can certainly earn a place in a three-year business plan.
Related: 8 Proven Ways to Make Money in Real Estate
3. Create an additional income stream that generates profits whether you work or not
I believe in having multiple sources of income, especially those that pay you not to work. I’m talking about cash. After paying all your bills and your mortgage on a property, the money you earn is yours. This can be a significant amount, depending on the number of assets you own and the profit margins.
4. Reduces volatility if you only invest in stocks and hedge against inflation
Most of the income that goes into your business usually comes back directly into your business. Yet, when paid personally through your business, you are likely to set up a savings account and invest it in stocks or mutual funds. You could take those savings and invest in real estate. Stocks won’t give you many of the benefits shared in this article. Also, if your tenants are covering your mortgage on a property, it doesn’t matter if the value of your property drops temporarily. You could potentially continue to earn income from the property if you have cash, no matter what the market does. With all the variables of running a business, reduce your stress level knowing you have no pending bills.
Moreover, if inflation increases, the value of the currency decreases. It takes more to make the same purchase. If you buy a property with a fixed rate mortgage, your monthly payment is based on the dollar value at the time of purchase. As you make payments over the years, you pay with cheaper dollars as inflation rises. If you’re not convinced, remember that the entire island of Manhattan was purchased in 1626 from the Dutch for $24 worth of beads and trinkets.
Related: How to Get Started in Passive Real Estate Investing
5. Someone Else Does The Work While You Still Get Great Returns – If You Invest Passively
Imagine if, while running your business, $10,000 was deposited into your account every month? You can invest in syndication deals where you are 100% passive and collect significant returns. These are large multi-family storage units, industrial buildings and mobile home parks, where someone handles all the moving parts of the transaction and invests your money while you make a profit. On top of all that, you can take advantage of depreciation. The amount of passive loss you re-report through passive gains is tax deductible.
“But is it risky or complicated to get into real estate?” you ask. It’s not as complicated as other investors want you to think. The more competition there is in the market, the harder it is for real estate investors to find deals. I believe there is enough room for everyone in every market, so I want you to know this best kept secret. Buying real estate is infinitely easier than building a profitable business. In other words, you can do it. As an entrepreneur, you are driven by success and need to use every tool possible to achieve your goals. I don’t know anyone who has bought real estate at the right price and ever said that buying real estate wasn’t a fantastic decision for all aspects of their life. After all, 90% of millionaires can’t be wrong.
Business strategies, entrepreneurial tips and inspirational stories are all in one place. Discover the new Entrepreneur’s Bookstore.